The Indian rupee hit an 18-month low against the US dollar on Friday, slumping to 75.72 after coming under pressure from a sustained demand for greenbacks.
The currency had fallen in the previous two days as the Reserve Bank of India‘s bi-monthly monetary policy decision failed to enthuse forex market participants.
“The US Federal Reserve is more keen in unwinding the stimulus and hiking rates, while the Reserve Bank of India is not keen in going for a hawkish stance,” Arnob Biswas, forex research head at SMC Global Securities, said.
According to a report by IFA Global, foreign investors are cautious ahead of the release of US data on Friday.
A sharper increase in prices in the US increases the risk of interest rates rising there. Higher interest rates would cause money to move back into US treasuries, triggering the dollar’s appreciation.
The RBI on Wednesday kept borrowing costs at a record-low for the ninth consecutive time, as it decided to continue supporting economic growth amid uncertainty over the impact of the Omicron strain on the economy.
“The RBI quashed any rate hike expectations and reinforced that it remains focused on supporting India’s post-delta recovery,” said Jeffrey Halley, strategist at forex brokerage OANDA in New York.
Results of a survey conducted by the RBI, which were released on Thursday, indicate that economists expect the rupee to remain stable within the narrow range of 74.70–75.00 against the US dollar until the second quarter of the 2022-2023 financial year.
- George Russell, with Reuters
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